Case Law Details
Even if the amount received on behalf of other person, satisfaction note and notice u/s 158BD issued in the name of receiver of income can still be held valid
Brief Facts
1. One search and seizure operation was carried out in respect of Batra group on 17.12.1999. During the course of search, the Revenue came across certain documents which formed the basis of a Satisfaction Note recorded under Section 158BD on 30.05.2002. Soon thereafter, notice was issued on 03.06.2002 and served on the assessee .
2. The document forming basis of the Satisfaction Note was a receipt executed sometime in 1999. The receipt stated “That the total deal has been settled/fixed between me and purchaser at Rs.33,00,000/- (Rupees Thirty Three Lakhs only).
3. The searched parties, i.e. the two Batra brothers, partner of M/s Om and S. Constructions had secured the roof rights and disclosed the consideration of ₹4 lacs as to the amounts indicated in the receipt. Mr.B.L.Goel, the assessee’s father was the Power of Attorney holder of the original owner Mr. B.B. Bhagat, on the basis of a document executed in 1991
4. The assessee contended that the amounts received by him were on behalf of his father and consequently another proceeding were followed as against him and the Satisfaction Note was, therefore, invalid. The Assessing Officer (AO) rejected the assessee’s contention and brought the said amount of Rs. 29 lakhs – determined by him to be undisclosed income – to tax.
Issue
Whether “Satisfaction Note which preceded notice under Section 158BD dated 03.06.2002 served upon the respondent/assessee is valid particularly when the amounts received by him were on behalf of his father.
Revenue Contention
1. That given the nature of the receipt which nowhere mentioned that the amount was received by the assessee on behalf of his father, the contentions made in the proceedings were unwarranted. The assessee denied having executed the receipt, nonetheless he admitted to the signatures and further voluntarily informed that he had received the amount on behalf of his father.
2. That the Revenue is not expected to make a detailed enquiry and investigation before issuing a Satisfaction Note forming the basis for a notice to the third party, learned counsel urged that there was material to indicate that the amount was actually received by the assessee even though the Satisfaction Note noticed that his father (the beneficiary) was the owner of the property.
Assessee’s Contention
1. That once the AO became aware that the property was not owned by the assessee and that he had received the amount on someone else’s behalf, notice could not have been issued under Section 158BD. He urged that this Court should not interfere with the ITAT’s order on this ground alone.
2. It is evident that it is precisely this dispute which this Court is called upon to decide. It was further submitted that the satisfaction note also indicated that the amount received by the assessee was on behalf of his father.
High Court held that
1. There is no dispute about the fact that the receipt was signed by the assessee which indicated that the total consideration was ₹33 lakhs. Even though it alluded to an agreement to sell dated 08.06.1999, the fact remains that no written agreement apparently was executed; what is a matter of fact, however, is that possession of the property was with the searched party, i.e. Batra brothers and their firm.
2. The searched party had disclosed the consideration received at ₹4 lakh only. It is also not in dispute that the amount was in fact received by the assessee. Given these circumstances, that the Satisfaction Note, prima facie, recorded that the owner of the property was B.L.Goel (assessee’s father) and that the amount was received by the assessee on the father’s behalf cannot be determinative in the facts of this case.
3. Since the amount was received, as a matter of fact, and the books of the purchaser showed that a fraction of that sum was disclosed as sale consideration, the Revenue was entitled to issue notice to the respondent, ascertaining whether such amount was actually received by him and, if so, on whose behalf, and proceed further.
4. In the circumstance, this Court is of the opinion that the ITAT’s order narrowly confirming the invalidity of the notice of the assessment, that the entire amount was received by the assessee on behalf of his father cannot be upheld. The property did not belong to Mr.B.L.Goel and the impugned order is not sustainable, it is accordingly set aside. The matter is remitted back to the ITAT to decide the assessee’s appeal in accordance with law .
Analysed by CA Rahul Sureka
